Business Investment Trust

A  Business Investment Trust (BIT) is a business specific Trust where the assets are held and administered by the Trustee of the Trust for the holders of units in the unit Trust. This means that the BIT pre-determines the Unit Holders entitlements, which may be for income, capital or both.


Advantages of  a Business Investment Trust

The BIT is very useful, especially for investors because different types of units can be issued. In simple terms (not legal) it is like having shares in a company where units can be bought and sold in a similar way to trading shares.

How does the BIT differ from other Trusts

1. No vesting date

Unlike most other Trusts, the BIT, does not have an ‘Expiry Date’ of up to 80 years where the Trust by law needs to be wound up which may trigger Taxes such as Capital Gains Tax and Stamp Duty. The BIT can last in perpetuity with no tax bill surprises in future for family members still running the business.

2. Lineage Clause

This option stipulates that only bloodline relatives will be legally entitled to be beneficiaries of assets contained in the BIT in the event of a lawsuit or a family feud with in-laws. Combined with the ‘no vesting date’,the lineage clause allows for advanced asset protection, succession planning and estate planning.

3. Additional Asset Protection

The Trust does not specifically identify asset protection benefits which a Receiver in Bankruptcy may be able to use as an argument that the Trust was created to defeat creditors and as such loses asset protection capacity.  Asset protection arises from the Trust itself, not by specific wording. Combined with the use of a Corporate Trustee, there will be even greater asset protection and limited liability.

Features & benefits include:

– The BIT is a business specific Trust with the ability to issue Units. Beneficial ownership is determined by the amount and type of units held by a person or entity.

– A Unit is a portion of the Trust which gives the holder the right to income and capital.

– Profits including capital and income are distributed via the units to the individual or another entity holding the units.

– Units can then be sold (will trigger CGT and maybe Stamp Duty) to other people or entities, entitling them to the profits or capital of the trust.

– The BIT can be used for unrelated parties to run a business together. This allows for a partnership model where partners can set up their own BET which would operate under a Partnership of Trust Agreement.

Flexibility and Control

The Business Investment Trust is designed for  are for those who want to:

  • Operate  a business or buy property with others and require specific allocations or ‘fixed entitlements’ between people or entities.
  • Run their business with multiple unrelated parties or entities with specific ownership rights.
  • Have the ability to sell as little or as many Units and different Unit classes to new unit holders (i.e. new business partners).
  • Determine which types of units are sold/issued, thereby controlling the beneficial ownership of each Unit Holder: Income Units (entitles the holder to net income only), Capital Units (entitles the  holder to net capital only) or Ordinary Units (entitles holder to both net income and net capital). Note: Specific allocations required if interest on borrowings are to be deductible.

Improved Asset Protection and Limited Liability

For improved asset protection, the BIT  will have a special purpose company as Corporate Trustee, as it limits the liability of the Trustee only to the extent of the assets held by the company (which should be only $2).  If the BIT is correctly utilised, assets are effectively isolated from the liabilities of the Unit Holders (individuals) and the Trustee. This is enhanced if Unit Holders are not individuals or entities with assets.

Tax Effective Support for Business Owners

The BIT permits the association of a number of unrelated entities in a venture with all income taxed at the Unit Holder level. This should be contrasted with companies that are taxed at the entity level, and then franked distributions made to the underlying owners (the Shareholders). 

The BIT  would have a Corporate Trustee and would distribute Trust income at the end of each period to according to fixed entitlements of each Unit Holder, taxed at the Unit Holders marginal tax rate. As the BIT  is registered for Tax (TFN) and GST (ABN) it’s easy for your accountant to prepare compliance in relation to Tax Returns, Business Activity Statements and Employee Payments.

Making Future Planning Easier

Business operators, in particular ‘Family owned and operated’ businesses would benefit from the unique Lineage Clause and the ‘No Vesting Date’ built into the Trust.These features would prevent the Trust from Vesting or ‘expiring’ after 80 years which in traditional Unit Trusts would mean cessation of the Trust Deed and the forced sale of assets, triggering taxes such as CGT and or Stamp Duty. 


This helps make succession planning, tax planning and estate planning easier by giving you peace of mind regarding these often forgotten but critical long term issues



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